Opinion of Advocate General
Mr President,
Members of the Court,
1. In these proceedings the Court is asked for an interpretation of certain provisions of Council Directive 77/91/EEC of 13 December 1976 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent (the Second Directive).
2. It is appropriate first to give details of that doctrine, which has recently been confirmed and analytically developed by the Bundesgerichtshof in its judgment of 15 January 1990. Essentially, German case-law classifies as a disguised contribution in kind any contribution in cash which, although in accordance with the formal provisions of company law, is temporally and substantively connected with a compulsory transaction by virtue of which the liquid funds received by the company as a result of the contribution in cash are returned to the subscriber. Such an operation constitutes, according to the prevailing case-law and views of legal writers, a circumvention of the provisions concerning contributions in kind — which require publication and verification of the value of the contribution made. The penalty for infringement of such provisions may take the form of an obligation to return the contribution made.
3. The facts of the case before the national court display certain peculiarities such as to make this case to say the least unusual in a number of respects. The company ADV/ORGA F. A. Meyer AG (hereinafter ADV/ORGA), which had been experiencing serious difficulties for several years, increased its capital in April 1989: the issue of new shares was guaranteed by Commerzbank, which as a result became the owner of them. Moreover, as early as December 1988, Commerzbank had already acquired a majority shareholding in ADV/ORGA; it had also granted loans to that company.
4. That is the issue which remains unresolved. The Landgericht, unlike the defendant company, considers that the information provided does not enable the contribution in question to be unequivocally classified. In particular, the Landgericht appears to consider that the additional information requested by Mr Meilicke is such as to have an impact on his rights as a shareholder, in so far as it might even prompt a declaration — in the light of the principles laid down in the German case-law — of the invalidity of the discharge of the obligations deriving from ADV/ORGA's loan — contracted before the increase of capital — by means of the contribution in cash made by the lender itself, Commerzbank.
5. The Meilicke case may be summarized as follows: (a) the dispute before the national court has been visibly orchestrated by Mr Meilicke himself; (b) he had adopted a position in the proceedings which is conducive to his claim being dismissed rather than upheld, with the result that doubts arise as to whether one of the conditions for recourse to the procedure under Article 177 is fulfilled, namely the existence of a dispute which the Court must help the national court to determine; (c) the national court considers it appropriate to seek a preliminary ruling for the sake of legal certainty and not to settle the dispute as required by Article 177 (perhaps precisely because there is no dispute?).
6. This brings us to the questions submitted by the national court.
7. By way of preliminary, I would observe that those questions, as already indicated, are intended to allow the national court correctly to apply a provision of national law (Paragraph 131 of the AktG) but are not intended to resolve — at least formally and directly — a problem of Community law.
8. That having being explained, I think it is appropriate to consider briefly the view put forward by the Commission as to the real subject-matter of the dispute in these proceedings. The Commission, recalling that it is not for the Court to comment on the reasons which prompted the national court to seek a preliminary ruling, quotes a passage from the Foglia v Novello II judgment in which the Court stated that the duty assigned to it was not that of delivering advisory opinions on general or hypothetical questions but of assisting in the administration of justice in the Member States, going on to conclude that it is necessary clearly to define the true subject-matter of the dispute before the national court, reformulating — if necessary — the questions submitted to it.
9. The very reasons on which the Commission relies in support of its view, moreover, give rise to considerable uncertainty. The Commission submits that the Landgericht's reference to the Court is to be regarded as premature, in so far as the answer given by the Court, although certainly allowing the national court correctly to apply its own national law (in this case Paragraph 131 of the AktG), would not resolve any dispute from the standpoint of Community law. Indeed, the very reference to the premature nature of the reference, as argued at the hearing, would appear to indicate that doubts were actually raised as to the appropriateness of a reference at that stage of the proceedings, a fact which in itself is not such as to render irrelevant the questions submitted with a view to a decision being given in the proceedings.
10. It is thus plain that I cannot share the Commission's views, whether its ostensible view (a reformulation which is tantamount to a non-answer) or its substantive position (the questions submitted are altogether irrelevant). I shall, therefore, proceed to consider the questions submitted by the Landgericht Hannover.
I — Classification of the claims made against the company and contributed to it
11. The importance of such a classification to resolution of the problem at issue is self-evident. If and to the extent to which the conclusion is reached that a claim against the company may be extinguished by means of a capital increase in cash, it is clear that a fortiori the repayment of a debt using financial resources provided by the selfsame creditor of the company in order to subscribe for shares must be regarded as being in conformity with the Second Directive, without there being any question — even in the abstract — of circumvention of the provisions governing contributions in kind.
(a) Minimum protection
12. First of all, the second recital in the preamble to the Second Directive states that its purpose is to ensure minimum equivalent protection for those shareholders and creditors of ... companies. At first sight, that statement is conducive to the conclusion that the adoption of more rigorous protective measures than those laid down at Community level or, if they already exist as part of the law of a Member State, their maintenance in force is to be regarded as proper.
(b) The concept of contributions in kind: a Community concept or reference to national law?
13. It is therefore clear, as is well illustrated by the example just given, that the demarcation line between contributions in cash and contributions in kind has a significant impact on the very scope of the directive, in view of the different rules laid down for the two categories of contributions; consequendy, the concepts in question must be interpreted without regard to the fact that the rules against circumvention are only minimum requirements or constitute complete rules from which the Member States may not derogate, not even by adopting stricter rules.
(c) Contributions of claims
14. That said, and taking particular account of the fact that the Second Directive adopts the negative term consideration other than in cash, it must be noted that, at least at first sight, contributions of claims appear to have to fall within the category of contributions other than in cash, thereby being subject to Articles 10 and 27(2) of the Second Directive.
(d) ... against a company experiencing a crisis
15. Serious objections may however be made to that approach where the company's losses exceed its capital: in such circumstances, it might be said that the money which is contributed, and which is the basis of the claim which it is intended theoretically to add to the capital, has already been consumed. In other words, where the company is experiencing a crisis, it could well be observed that the real value of the shareholder's claim is in fact, precisely because of the debtor company's financial difficulties, lower than the actual nominal value and therefore, possibly, than that of the shares corresponding to the debt which it is thus sought to extinguish. And that is precisely the position adopted in German legal literature and case-law.
16. For the aforesaid reasons, Article 7 must therefore be interpreted as meaning that the claim may be valued only from the company's point of view: it is clear that, from that point of view, the valuation of a claim (or rather, from the company's point of view, a debt) may not be based on anything other than its nominal value.
II — Protection against circumvention of the rules governing contributions in kind
17. The limits within which a claim against the company may be extinguished by means of an increase in capital in cash having been established, I shall go on to consider Articles 10, 11 and 27(2) in order to establish whether they contain mere minimum requirements, and if so subject to what limits, or provisions which lay down exhaustive rules, thus leaving no margin of discretion to the Member States.
18. Article 11, on the other hand, certainly raises greater problems of interpretation, both from the literal point of view and as regards the very ratio legis thereof, in particular in relation to the part it plays in providing protection against circumvention of the rules concerning contributions in kind.
19. The first thought prompted by a reading of the provisions is that the Community legislature intended to prevent circumvention of the rules on contributions in kind by means of transactions, separate from the contract in respect of the contribution, which essentially transfer ownership (or some other right) in respect of specific assets, without the safeguards and controls prescribed for that purpose. It is clear that any person wishing to contribute property in kind, but unwilling to comply with the obligation of submitting a sworn valuation report, could initially make the contributions in cash and subsequently, by agreement with the directors, sell that property to the company. A transaction of that kind would have the twofold effect of releasing the valuation of the property from the particularly strict rules under Article 10 and, possibly, of making it possible to return the contribution to the shareholder.
20. Accordingly, it is necessary to ask whether the Community legislature considered that, in order to avoid abuses, it was sufficient to impose an obligation of diligence on the directors and therefore to render them liable in the event of operations prejudicial to the company or to the interests of shareholders and/or third parties, or whether, on the other hand, the absence of specific rules in that regard must be understood as implying that each Member State is free to adopt such measures as it considers most appropriate.
21. That said, I believe that each legal system is entitled to use its own general legal provisions (I refer to concepts such as circumvention of the law, abuse of law, concealment) to penalize operations in which avoidance, rather than being irrebuttably presumed — that, essentially, being the effect of Article 11 — is proved by other means, in particular where it is proved that the parties intended to circumvent the provisions on contributions in kind. That approach might be subject to review by the Court of Justice as regards interpretation, to ensure that the requirements which Community law seeks to safeguard through the process of harmonization of company law are not disregarded.
III — The direct applicability of the provisions of the Second Directive
22. The Court has already upheld the direct applicability of certain provisions of the Second Directive, more particularly Article 25(1) and Article 29(1), referring on those occasions to its consistent case-law whereby a provision which is unconditional and sufficiently precise may be relied upon by individuals before national courts as against the administration.
23. In the light of the foregoing, therefore, I propose that the Court replies as follows to the questions (as reformulated by me) submitted by the Landgericht Hannover:
1 Original language: Italian.
2 OJ 1977 L 26, p. 1.
3 Alike, II ZR 164/88, BB p. 311.
4 Bundesgesetzblatt I, 1978, p. 1959.
5 In fact the Landericht merely states that it is not necessary to give a decision since the information has already been supplied, without specifying the kind or amount of information provided in response to Mr Meilicke's request.
6 See for example Die Verschleierte Sacheinlage; eine deutsche Fehlentwicklung, Stuttgart 1989; Die Kapitalaufbringungsvorschriften als Sanierungsbremse-Ist die deutsche Interpretation des § 27 Abs 2 AktG-richtlinienkonform in DB, 1989, p. 1067 et seq.; and also Meilicke-Recq, L'apport de créances détenues sur une Société en difficulté financière, in Revue Trimestrelle de Droit Européen, 1991, p. 587.
7 Such a position undermines, in my view, the plaintiff's actual interest in bringing an action. Joost, commenting on the Landgericht's order for reference (EWiR § 183 AktG 1/91, p. 325), expressed doubts as to the admissibility of the application seeking information itself, specifically because Meilicke himself considers the doctrine of disguised contributions in kind to be without foundation, thus invalidating the basis of the right to the information.
8 This is in fact a peripheral matter which is without conse-âuence, at least in so far as there is no reason to believe that ie proceedings before the national court are in the nature of a procedural device fabricated by the parties in the manner described by the court in the well-known judgments in Case 104/79 Foglia v Novello I [1980] ECR 745 and in Case 244/80 Foglia v Novello II [1981] ECR 3045).
9 See Order in Case C-286/88 Falciola [1990] ECR I-191, paragraph 8; and judgment in Case 126/80 Sabnia [1981] ECR 1563, paragraph 6.
10 See most recently the judgment in Case C-231/89 Gmurzynska [1990] ECR I-4016, paragraph 23.
11 Joined Cases C-297/88 and C-197/89, [1990] ECR I-3763, paragraphs 31 to 43.
12 Case 244/80, cited above, paragraph 18.
13 Judgments in Case 35/85 Ussier [1986] ECR 1207, paragraph 9; Case 54/80 Wilner [1980] ECR 3673, paragraph 4; Case 4/79 Providence Agricole de la Champagne [1980] ECR 2823, paragraph 15.
14 In this connection, see point 7 above.
15 See the judgments cited in footnote 12.
16 Case C-381/89 Evangeliki Ekklissia [1992] ECR I-2111.
17 In that regard, I would point out that in France, Belgium and the United Kingdom, voluntary setoff is permitted in the case of a liquidated and payable claim; that is the case even where the company is making a loss; in Italy, setoff by operation of law is permitted, the same conditions applying. In Germany, on the other hand, a shareholder is precluded from availing himself of the possibility of setting the debt arising from a contribution off against a claim vested in the subscriber (Paragraph 66 AktG); however, it is considered that the company may follow such a procedure to discharge its obligation to extinguish a debt whenever the claim is liquidated, payable and vollwertig (in other words, not subject to depreciation in view of the company's financial status).
18 The rules in question have been borrowed from German company law, the only legal system which envisages such a case (I refer to the Nachgründung to which Paragraph 52 of the AktG relates).
19 In any event, it does not apply to acquisitions effected after the expiry of two years as laid down in the provision in question (or such longer terms as may have been laid down by the national legislature).
20 It is quite clear that the case referred to may arise only in connection with an increase in capital, since there are extremely few cases in which a claim could be made against (and contributed to) a company which had not yet been incorporated; in essence that can only be done in respect of the costs of setting up the company itself.
21 A case such as that described here might, in the absence of specific rules, arise where a transaction is carried out to circumvent the taw and therefore is penalized by being declared void. Naturally, in such a case it would be necessary to prove the existence of circumstances characterizing a transaction designed to circumvent the law, namely the fact that the transaction is capable of achieving the same result as that which is prohibited, together with the intention, on the part of both parries, to circumvent a mandatory provision.
22 Joined Cases C-19/90 and C-20/90 Karelia and Karellas [1991] ECR I-2691.
23 Case C-381/89 Evangeliki Ekklissia, cited in footnote 15, at paragraph 39.
24 In that regard, I would add, with reference to the doctrine of disguised contributions in kind, that it is difficult to understand the standpoint of the Bundesgerichtshof in its abovementioned judgment of 15 January 1990, or that of the Bundesverfassungsgericht in its judgment of 27 August 1991 (Der Betrieb, 1991, p. 2230), according to which the Second Directive is so ... clear that no interpretation is needed: the basis for that view being the judgment in Case C-2S3/81 CILFIT [1982] ECR 3415). I would merely point out that that judgment expressly states that the national court must, before coming to the conclusion that there is no need to make a reference to the Court, be convinced that the matter is equally obvious to the courts of the other Member States and to the Court of Justice {paragraph 16). As regards any doubts of interpretation which the theory of disguised contributions in kind may raise with respect to the relevant provisions of the Second Directive, suffice it to refer here to the differences in the way it is applied in the various Member States, and the debate among legal academic writers on that subject, particularly in Germany, to show that the interpretation of the directive in question is not so clear. In those circumstances, the reference to the CILFIT judgment is inappropriate to say the least.
25 Case 111/75 Mazzalai [1976] ECR 657, paragraph 10.
26 Case C-106/89 [1990] ECR I-4135, paragraph 8.